Indian Banks Set to Raise Record Rs 40,000 Crore via Infrastructure Bonds

Indian banks are gearing up to raise a substantial Rs 40,000 crore through infrastructure bonds in July and August, aiming to surpass last year’s record. If successful, the funds raised in the first five months of this fiscal year will exceed the Rs 54,400 crore raised in the entire previous fiscal year.

The State Bank of India led the charge by raising Rs 10,000 crore at a historic low coupon rate of 7.36%, just slightly above government securities’ yield. This move indicates strong market confidence, with major investors like Life Insurance Corporation of India, provident funds, and mutual funds showing keen interest.

ICICI Bank also secured Rs 3,000 crore through a 10-year bond sale at a coupon rate of 7.53%, ensuring long-term funds for infrastructure projects.

Following these successful issuances, HDFC Bank plans to raise up to Rs 15,000 crore, while Canara Bank and Bank of Baroda are expected to issue bonds worth Rs 10,000 crore each. Bank of India is projected to raise Rs 5,000 crore.

The surge in infrastructure bond issuances mirrors last year’s trend and responds to increasing credit demand amid slower deposit growth. This trend is fueled by government spending on sectors like steel, roads, and renewable energy, attracting robust investor interest.

Investors, particularly insurance companies and provident funds, are drawn to these long-duration bonds for portfolio diversification and to align with increasing portfolio duration needs. This growing demand is also narrowing the spread over government securities sought by investors.

The central government’s commitment to investing over Rs 11 lakh crore in long-term infrastructure projects this fiscal year is expected to further boost these bond issuances, stimulating economic growth and employment opportunities.